Month: October 2021

A guide to navigating the new auto debit rules

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New regulations that require a second factor authentication for certain auto debit transactions are becoming operational from October 1, 2021. How will this impact all your automated transactions such as EMIs, phone, gas and electricity bill payments and SIPs? How can you work around the new rules if your bank or merchant is not yet compliant? Read on to know.

Affected transactions

To begin with, not all your automated payments will be affected. RBI’s new guidelines will impact only all recurring contactless payments made through debit/credit cards, UPI and prepaid instruments and this, when done from third party websites and apps.

Transactions initiated on the bank’s website or app will continue hassle-free. For example, if you have automated a payment on your HDFC Bank debit/credit card through their BillPay Service, this can go on.

Also read: Auto debit norms: Payments Council of India seeks extension for smooth transition

Payments initiated through third party apps, that do not comply with RBI’s guidelines may not go through henceforth. This is because the new RBI guidelines mandate such transactions to undergo additional factor authentication. This means that every recurring transaction automated from outside a bank’s portal will now require a second factor authentication by way of an OTP.

For all your automated debits exceeding ₹5,000 per transaction, you will henceforth be required to authorise the banks to carry out the transaction every time the transaction falls due. An OTP will be sent to you 24 hours prior to the transaction, for every payment to go through.

The OTP will be sent on your registered email address and phone number, along with details of the merchant, transaction amount. A link that enables you to modify or cancel the transaction or the recurring mandate itself will also be sent alongside.

Additional factor authentication will only be one-time in nature for payments below ₹5,000 (required at the time of registering the mandate). If you have already registered such mandates with third party apps/websites that are compliant with the new guidelines, your payments will continue hassle free. In case the merchant is not compliant, banks will intimate you to give the one-time additional authentication for such transactions.

It is noteworthy that large private banks, such as HDFC Bank, ICICI Bank, and Axis Bank have been enabling automated payments with additional factor authentication, for e-mandates across various merchants.

In many other banks, this was only available for transactions or standing instructions placed through bank’s net banking, phone banking or UPI portal. Examples for these include your loan EMIs and monthly investments such as SIPs, where in you either signed the NACH/ECS mandate or providing a standing instruction through the bank’s net banking portal.

Following the October 1 deadline, more banks have tied up with select merchants to enable such two-factor authentication as mandated by the RBI. But some are yet to comply.

Tackling non-compliant transactions

Transactions initiated with non-compliant merchants may not go through, starting October 1, 2021. You can make direct payments on the app/ website of the merchant or choose the merchant under your UPI, net banking or card account and pay them when the dues come up.

However, if you want to continue automating transactions with such non-compliant merchants, banks may require you to register the recurring payments on the bank’s portal.

For instance, if you opted for an auto-renewal of your OTT platform subscription, the same may not go through starting October 1, if the same is not compliant with the new guidelines issued by RBI. Do note that while Amazon Prime, Netflix and Hotstar are currently integrated into the common platform, other OTTs haven’t.

How will you know whether your merchant is compliant or not? Fret not. Banks will intimate customers regarding the same through text and email. Customers can then issue the standing instructions afresh to banks, to continue automating the transactions, hassle free.

Leave alone non-compliant merchants, many banks themselves have not yet upgraded their software to comply with the new guidelines. Customers of such banks who have authorised automated payments to merchants need to check with their banks on the status recurring payments.

In the interim, you can make direct payments on the app/ website or choose the merchant under your UPI /net banking/card account and make the payment each time the payment it is due.

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Piramal Capital merges with DHFL

Banking & Finance

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Piramal Capital and Housing Finance Ltd (PCHFL) has merged with Dewan Housing Finance Corporation Ltd (DHFL).

“PCHFL has merged into DHFL with effect from September 30, 2021, pursuant to the reverse merger as contemplated under scheme of arrangement provided under the resolution plan,” Piramal Enterprises Ltd said in a stock exchange filing on Friday.

Also read: Ajay Piramal on the challenges faced in acquiring DHFL and the road ahead

Following this reverse merger, DHFL will issue equity shares to the shareholders of PCHFL in accordance with the scheme of arrangement provided under the resolution plan, it further said, adding that once the equity shares are allotted, DHFL will become a wholly-owned subsidiary of Piramal Enterprises Ltd (PEL).

The process is likely to take about four weeks to be completed. The development comes soon after PEL paid ₹34,250 crore for DHFL, completing its acquisition of the housing finance player.

The acquisition of DHFL is in line with a strategic roadmap to transform and expand PEL’s financial services business.

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Swing Pricing In Debt Funds: Major Things To Know

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Planning

oi-Sneha Kulkarni

|

The Securities Exchange Board of India (SEBI) has introduced swing pricing in bond funds to shield debt fund investors from big redemptions by other investors.

The Indian Association of Mutual Funds has been asked to propose broad parameters for determining swing pricing thresholds and an indicative swing threshold range for normal times. For the same, asset management firms (AMCs) are permitted to have additional parameters.

Swing Pricing In Debt Funds: Major Things To Know

Except for overnight funds, gilt funds, and gilt funds with a 10-year maturity scheme, the regulator has established the swing pricing structure for bond fund units. With effect from March 1, 2022, this circular will be implemented.

What is Swing Pricing in mutual funds?

Swing pricing is when a fund’s net asset value (NAV) is adjusted to pass on trading charges to customers who purchase and sell inside their accounts. Its purpose is to shield long-term shareholders from the fund’s transaction activity eroding the value of their accounts.
If a fund’s net inflows or withdrawals surpass a certain amount defined by the fund provider, swing pricing is used. The supplier calculates the NAV as usual before modifying it by the selected swing factor in all cases.

Swing pricing for normal times

The swing pricing methodology during regular times is as follows:

The MFI will provide broad rules for determining thresholds for triggering swing pricing, which the AMCs will follow. AMFI will also give the industry an indication of a swing threshold range at typical times.

In addition, depending on the structure and characteristics of the mutual fund scheme, AMC may be allowed to have other parameters if it so wants. iii. For typical times, AMCs will determine whether swing pricing is applicable and the magnitude of the swing factor based on scheme-specific issues.

Swing pricing for market dislocation

AMFI will establish a set of guidelines for identifying market dislocation and will suggest it to SEBI. SEBI will evaluate if there is a “market dislocation” based on AMFI’s recommendation or on its own. When a market dislocation is announced, SEBI will notify investors that swing pricing would be in effect for a set length of time.

The swing pricing structure will be mandated exclusively for open-ended debt schemes excluding overnight funds, Gilt funds, and Gilt with 10-year maturity funds following the declaration of market dislocation.

The schemes stated in para II(b) above will be subjected to a minimum swing factor as follows, and the NAV will be adjusted accordingly.

Within three months of the date of this circular, all open-ended debt schemes except overnight funds, Gilt funds, and Gilt with 10-year maturity funds.

As a result, swing pricing acts as a “circuit breaker” for mutual funds, increasing the cost of departing schemes and preventing major investors from making rapid withdrawals.

Story first published: Friday, October 1, 2021, 11:11 [IST]



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Equitas Small Finance Bank Revises Interest Rates On FD: Latest Rates Here

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Equitas Small Finance Bank FD Interest Rates For Regular Citizens

Following the most recent adjustment on interest rates, regular citizens will now get a higher return of 6.00% on their deposits maturing in 2 years 1 day 887 days to less than 3 years and 5 years 1 day to 10 years respectively.

Tenure Interest rates for amount less than Rs. 2 crore w.e.f 1st October 2021
7 – 14 days 3.50%
15 – 29 days 3.50%
30 – 45 days 3.50%
46 – 62 days 4.00%
63 – 90 days 4.00%
91 – 120 days 4.35%
121 – 180 days 4.35%
181 – 210 days 4.85%
211 – 270 days 4.85%
271 – 364 days 4.85%
1 year to 18 months 5.85%
18 months 1 day to 2 years 5.75%
2 years 1 day to 887 days 6%
888 days 6%
889 days to 3 years 6%
3 years 1 day to 4 years 5.75%
4 years 1 day to 5 years 5.75%
5 years 1 day to 10 years 6%
Source: Bank Website, with effect from 1st October 2021

Equitas Small Finance Bank FD Interest Rates For Senior Citizens

Equitas Small Finance Bank FD Interest Rates For Senior Citizens

Senior citizens will continue to get an additional rate of 0.50% on their deposits. The latest interest rates on fixed deposits of senior citizens are as follows.

Tenure Rate of interest p.a.
7 – 14 days 4.00%
15 – 29 days 4.00%
30 – 45 days 4.00%
46 – 62 days 4.50%
63 – 90 days 4.50%
91 – 120 days 4.85%
121 – 180 days 4.85%
181 – 210 days 5.35%
211 – 270 days 5.35%
271 – 364 days 5.35%
1 year to 18 months 5.35%
18 months 1 day to 2 years 6.25%
2 years 1 day to 887 days 6.50%
888 days 6.50%
889 days to 3 years 6.50%
3 years 1 day to 4 years 6.25%
4 years 1 day to 5 years 6.25%
5 years 1 day to 10 years 6.50%
Source:Bank Website, with effect from: 1st October 2021

Equitas Small Finance Bank RD Rates

Equitas Small Finance Bank RD Rates

With effect from 1st October 2021, Equitas Small Finance Bank is promising the below-listed interest rates on recurring deposits to both regular and senior citizens.

Tenure Interest rates for amount less than Rs. 2 crore w.e.f 1st October 2021 Interest rates for senior citizens
12 Months 5.85% 6.35%
15 Months 5.85% 6.35%
18 Months 5.85% 6.35%
21 Months 5.75% 6.25%
24 Months 5.75% 6.25%
30 Months 6% 6.50%
36 Months 6% 6.50%
48 Months 5.75% 6.25%
60 Months 5.75% 6.25%
90 Months 6% 6.50%
120 Months 6% 6.50%
Source: Bank Website, with effect from 1st October 2021



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5 SIPs To Invest For October 2021 That Are Rated “No 1” By CRISIL

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Be cautious when investing

Though individuals are investing in SIPs, it is time to be very cautious. The Sensex at 60,000 points is overvalued and even those looking at SIPs, may want to invest smaller lots. In case the markets fall, it maybe more prudent to increase your Systematic Investment Plans, if you are investing in equity mutual funds. At the moment we are suggesting investors, to look for hybrid funds, which allows the fund manager to invest in bonds as well as equities and thus hedge their risk.

Mutual funds that are rated No 1 by CRISIL

Mutual funds that are rated No 1 by CRISIL

Here is a list of mutual funds that are rated as No 1 by CRISIL, in their respective categories.

Name Category 1-year returns 3-year returns
BOI AXA Mid & Small Cap Equity & Debt Fund Hybrid 78.26% 15.62%
PGIM India Flexi Cap Fund Flexi Cap 68.98% 23.47%
Canara Robeco Bluechip Equity Fund Largecap 47.14% 17.14%
IDBI India Top 100 Equity Fund Largecap 51.69% 14.53%
Franklin India Bluechip Fund Largecap 46.70% 12.27%

Why we are recommending only the above 5?

Why we are recommending only the above 5?

To begin with given where the stock markets are we believe that spectacular returns as in the last 1-year is out of the question. We are hence recommending only the hybrid, flexi and largecap mutual funds. In fact, we do not even like flexi cap mutual funds, given that they would have exposure to small and midcap stocks as well.

At the moment we are recommending only hybrid funds, where the fund manager has the flexibility to switch between debt and equity. We will be covering Hybrid mutual fund SIPs in a separate article. We also urge investors to start switching to debt mutual funds, given the way markets have rallied in the last 1-year. I mean, it may also be time to protect your capital, if not entirely than partially at the very least.

Disclaimer:

Disclaimer:

Investing in mutual funds poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies and the author are not liable for any losses caused as a result of decisions based on the article. The above article is for informational purposes only and investors should exercise some discretion.



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Bank of Maharashtra raises issue of breach of confidentiality in Videocon insolvency process, BFSI News, ET BFSI

Banking & Finance

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Bank of Maharashtra, a dissatisfied creditor of Videocon Group, has on Thursday raised the issue of the breach of confidentiality in the corporate insolvency resolution process of the debt-ridden group before the National Company Law Appellate Tribunal (NCLAT). During the proceedings, counsel appearing for the Bank of Maharashtra wondered as to how the bid amount of the successful resolution applicant Twin Star Technologies was so close to the liquidation value.

“Here the kind of bid that has come is so close to the liquidation value clearly suggests that the confidentiality has not been maintained. More than 95 per cent proceed is being given to the secured creditors (as per the plan) because of the leak of this (liquidation) value to the bidders,” submitted senior advocate Vikas Singh appearing for Bank of Maharashtra.

Singh also said that the resolution plan provides for payment to the dissenting financial creditors by way of non-convertible debentures (NCDs) and equities which is contrary to the rules set out in the Insolvency and Bankruptcy Code (IBC).

Twin Star’s resolution plan of Rs 2,962.02 crore meant a haircut of over 95 per cent on admitted claims of Rs 64,838.63 core.

Even the Mumbai-bench of the NCLT, while approving Anil Agarwal’s Twin Star Technologies’ Rs 2,962.02 crore-bid had observed creditors of debt-ridden Videocon Industries Ltd will be taking nearly 96 per cent haircut on their loans and the bidder is “paying almost nothing”.

The NCLAT will continue hearing the matter on Friday also.

During the proceedings, Solicitor General Tushar Mehta representing the Committee of Creditors submitted that due to paucity of time, a rejoinder to the reply filed by the Twin Star could not be filed. It was assured to be filed by Friday in physical form.

“In the meanwhile, the parties, who have not filed ‘written submissions’ yet, are directed to file the same positively by tomorrow in physical form,” said a two-member bench comprising Justice Jarat Kumar Jain and Ashok Kumar Mishra.

Earlier on June 9, the Mumbai bench of the National Company Law Tribunal (NCLT) has approved a Rs 2,962 crore takeover bid by Twin Star Technologies for the 13 companies of the debt-ridden group.

However, the NCLT order was stayed by the appellate tribunal on July 19 over the petitions filed by two dissatisfied creditors of the Videocon Group – Bank of Maharashtra and IFCI Ltd and had directed to maintain “status quo ante”.

Later, lenders to Videocon Industries had also approached the insolvency appellate tribunal seeking fresh bids for the 13 companies of the debt-ridden group. PTI KRH MKJ



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Lenders approach RBI after Rs 30,000 crore Srei loans turn NPA, BFSI News, ET BFSI

Banking & Finance

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A consortium of lenders led by UCO Bank has sought central bank directions on pursuing recovery of dues from the Srei Group after loans worth about ₹30,000 crore to the Kolkata-based financier officially qualified to be moved to the list of non-performing assets (NPA) this quarter, two people aware of the development told ET.

The Srei Group, however, said it expects banks to chalk out a debt recast plan that will map repayment milestones to future cash flows.

Since the group entities involved are non-banking financial companies (NBFC), the lenders concerned compulsorily need the Reserve Bank of India‘s (RBI) approval to take the Srei Group to the National Company Law Tribunal (NCLT) for insolvency proceedings.

In response to a query from ET, a Srei Group spokesperson said the economic downturn and loan moratoriums provided by the regulator had affected operations. The group is now in discussions with banks to implement a restructuring scheme.

‘NPA Ratio to Take a Hit’
“We hope banks will decide on the debt realignment at the earliest so that the company can pay all its bondholders and other creditors,” a Srei spokesperson said in the mailed response to ET. “We are very hopeful that banks will propose a payment schedule in consonance with the company’s cash flow that will enable payments to all creditors and help run the company smoothly.”

To be sure, Srei Infrastructure Finance may become the next big bankruptcy candidate from the financial services space after Dewan Housing Finance (DHFL). Banks are free to classify loans to Srei Group as NPAs after the National Company Law Appellate Tribunal (NCLAT) lifted a stay earlier this month on marking such exposure as bad, setting aside a lower bench order.

  • Srei Infra and its unit Srei Equipment Finance together owe lenders and debenture holders Rs 30,000 cr
  • UCO Bank, SBI have exposure of more than Rs 2,000 cr each
  • Srei Infra reported a loss of Rs 971 cr in the June quarter
  • Provisions on loans surged to Rs 439 cr from Rs 67 cr a year ago
  • In July, Srei disclosed that a RBI-directed audit had flagged Rs 8,576 cr of lending to ‘probable’ related parties of the group

“All banks will have to classify loans to Srei as NPAs this quarter and make the minimum provisions required,” said a person familiar with banking-sector exposure to the Srei Group. “Many banks have excess provisions; so, that should not be a cause for concern. But with such a big loan account slipping, the gross NPA ratio of some banks will increase at the end of the quarter.”Srei Infrastructure, and its subsidiary Srei Equipment Finance, together owe lenders and debenture holders a total of ₹30,000 crore. Kolkata-based UCO Bank is the lead lender, with more than ₹2,000 crore of exposure. State Bank of India (SBI)’s exposure to the group is also more than ₹2,000 crore.

Bankers say they have already set the ball rolling for recovery of loans by writing to the RBI and a regulatory nod to take the company through the bankruptcy courts could mean another DHFL-type insolvency process.

“Already two letters have been sent to apprise RBI of the conditions. If the central bank gives the permission, banks will go ahead with a court monitored process,” said a second person aware of the Srei-related banking-sector exposures. “It remains to be seen what the central bank’s response is.”



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SBI, Union Bank, PNB pick up stake in NARCL, BFSI News, ET BFSI

Banking & Finance

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Three state-owned lenders — SBI, Union Bank of India and PNB — picked up over 12 per cent stake each in the proposed bad bank NARCL on Thursday, and said their holdings will be brought down by December. While State Bank of India (SBI) and Union Bank of India picked up 13.27 per cent stake each, representing a cumulative 3.88 crore shares in the National Asset Reconstruction Company Ltd (NARCL), PNB subscribed to 12.06 per cent stake (1,80,00,000 shares).

In a regulatory filing on the subscription to 1,98,00,000 shares of NARCL (pending execution of the investment agreement), the country’s largest lender SBI said the “investment of equity stake of 13.27 per cent by State Bank of India to be reduced to 9.90 per cent by 31st December 2021”.

Union Bank of India, in its regulatory filing, said it has subscribed to 1,98,00,000 shares of NARCL (pending execution of investment agreement).

The lender said it will bring down its stake of 13.27 per cent to 9.90 per cent by December 2021 on subscription by other public sector banks (PSBs)/ financial institutions.

“Punjab National Bank has subscribed to 1,80,00,000 shares of National Asset Reconstruction Company Ltd (pending execution of investment agreement),” the bank said in a separate filing.

PNB said it will bring down its stake from 12.06 per cent to 9 per cent by December 31, 2021.

NARCL, which is yet to become operational, will take over the bad assets of banks in its own account for speedy resolution of sour loans.

All the three lenders have subscribed to the equity in NARCL at Rs 10 per share. The completion of the acquisition by them is expected by March 2022.

Earlier this month, the Cabinet cleared a proposal to provide government guarantee worth Rs 31,000 crore to security receipts issued by the NARCL.

Incorporated on July 7, 2021, NARCL will pay up to 15 per cent of the agreed value for the bad loans in cash and the remaining 85 per cent would be government-guaranteed security receipts.

It will be 51 per cent owned by PSBs and the remaining by private sector lenders. State-owned Canara Bank has expressed its intent to be the lead sponsor of NARCL with a 12 per cent stake. PTI KPM ABM ABM



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Aditya Birla Sun Life AMC IPO fully subscribed on Day-2, BFSI News, ET BFSI

Personal Finance

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The initial public offer of Aditya Birla Sun Life AMC Limited was fully subscribed on the second day on Thursday. The Rs 2,768.25-crore initial share sale received bids for 2,99,46,460 shares against 2,77,99,200 shares on offer, translating into 1.08 times subscription, according to an update on the NSE.

The qualified institutional buyers (QIBs) category was subscribed 6 per cent, non-institutional investors 40 per cent and retail individual investors (RIIs) two times.

The initial public offer is of 3,88,80,000 equity shares.

The initial share-sale is entirely an offer for sale, wherein two promoters — Aditya Birla Capital and Sun Life (India) AMC Investments — will divest their stake in the asset management firm.

The price range for the offer is Rs 695-712 per share.

Aditya Birla Sun Life AMC on Tuesday said it has collected Rs 789 crore from anchor investors.

Aditya Birla Sun Life AMC Ltd, the investment manager of Aditya Birla Sun Life Mutual Fund, is a joint venture between Aditya Birla Group and Sun Life Financial Inc of Canada.

Asset management firms like Nippon Life India Asset Management, HDFC AMC, and UTI AMC are already listed on the stock exchanges.

Kotak Mahindra Capital Company, Bofa Securities India, Citigroup Global Markets India, Axis Capital, HDFC Bank, ICICI Securities, IIFL Securities, JM Financial, Motilal Oswal Investment Advisors Limited, SBI Capital Markets and YES Securities (India) are the managers of the offer. PTI SUM BAL BAL



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